FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-16257
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PACE MEDICAL, INC.
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(Exact name of small business issuer as specified in its charter)
MASSACHUSETTS 04-2867416
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
391 TOTTEN POND ROAD, WALTHAM, MASSACHUSETTS 02451
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(Address of principal executive offices )
(781) 890-5656
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(Issuer's telephone number,
including area code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 12, 2001.
3,354,870 shares of Common Stock, par value $.01 per share
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
a) Condensed Consolidated Balance Sheets
b) Condensed Consolidated Income Statements
c) Condensed Consolidated Statements of Cash Flows
d) Notes to Condensed Consolidated Financial Statements
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 DECEMBER 31, 2000
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(Unaudited) (See note below)
ASSETS
Current assets:
Cash and cash equivalents $ 1,191,175 $ 1,252,352
Accounts receivable 344,333 264,873
Inventories:
Raw materials 337,951 242,965
Work-in-process 118,617 147,547
Finished goods 133,688 214,966
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590,256 605,478
Other current assets 10,180 23,820
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Total current assets 2,135,944 2,146,523
Plant and equipment, net 47,046 50,652
Other assets 120,412 121,051
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TOTAL ASSETS $ 2,303,402 $ 2,318,226
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 157,500 $ 117,304
Accrued expenses 15,267 65,397
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Total current liabilities 172,767 182,701
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Shareholders' equity:
Common stock, $.01 par value, 5,000,000
shares authorized, 3,400,870 issued 34,009 34,009
Additional paid-in capital 3,147,151 3,147,151
Cumulative translation
adjustment (7,441) 32,725
Accumulated deficit (1,011,337) (1,046,613)
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2,162,382 2,167,272
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Less: Treasury Stock, at Cost,
46,000 shares (31,747) (31,747)
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Total Shareholders' Equity 2,130,635 2,135,525
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,303,402 $ 2,318,226
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Note: The balance sheet at December 31, 2000 has been taken from the audited
financial statements at that date.
See accompanying notes to condensed consolidated financial statements.
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31
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2001 2000
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Net Sales $394,471 $440,208
Cost of sales 195,229 179,476
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199,242 260,732
Other operating expenses 177,198 190,580
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Income from operations 22,044 70,152
Other income 13,232 14,835
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Net income $ 35,276 $ 84,987
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Net income per share:
Basic $ .01 $ .03
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Diluted $ .01 $ .02
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See accompanying notes to condensed consolidated financial statements.
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,276 $ 84,987
Adjustments to reconcile
net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,283 3,918
Change in assets and
liabilities, net: (98,199) (83,457)
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Net cash (used in) provided by
operating activities (58,640) 5,448
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment (2,537) (63,719)
CASH FLOW FROM FINANCING ACTIVITIES - -- --
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (61,177) (58,271)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD $ 1,252,352 $ 1,513,514
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,191,175 $ 1,455,243
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See accompanying notes to condensed consolidated financial statements.
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PACE MEDICAL, INC. AND WHOLLY-OWNED SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements and these notes
have been condensed and do not contain all disclosures required by generally
accepted accounting principles. See notes to audited consolidated financial
statements contained in the Company's annual report.
2. In the opinion of the Company, the accompanying unaudited condensed financial
statements contain all adjustments, all of which are normal and recurring,
necessary to present fairly the financial position of the Company and its
wholly-owned subsidiary as of March 31, 2001 and the results of their operations
for the three months ended March 31, 2001 and March 31, 2000 and their cash
flows for the three months ended March 31, 2001 and March 31, 2000.
3. The Company prepares its financial information using the same accounting
principles as for its annual financial statements except that no physical
inventories were taken during either of the periods ended March 31, 2001 or
2000. Cost of sales for such periods was calculated primarily using standard
cost methods.
4. The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the full year.
5. The denominator used to determine basic net income (loss) per share includes
the weighted average common shares outstanding during the quarter. The
denominator used to determine diluted net income per share includes the shares
used in the calculation of basic net income per share plus the weighted average
options outstanding during the period using the treasury-stock method.
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THREE MONTHS ENDED
MARCH 31
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2001 2000
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Net Income $ 35,276 $ 84,987
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Weighted-average shares outstanding 3,354,870 3,375,870
Effect of dilutive securities 27,629 101,957
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Total shares 3,382,499 3,477,827
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Basic net income per share $ 0.01 $ 0.03
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Diluted net income per share $ 0.01 $ 0.02
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6. The Company has adopted the provisions of SFAS No. 130," Reporting
Comprehensive Income". Comprehensive income includes net income and foreign
currency translation adjustments. Comprehensive income for the three months
ended March 31, 2001 and 2000 is as follows:
THREE MONTHS ENDED
MARCH 31,
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2001 2000
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Net Income $ 35,276 $ 84,987
Currency Translation Adjustment (40,166) (10,279)
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Total $ (4,890) $ 74,708
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION
As of March 31, 2001, the Company had cash and cash equivalents of $1,191,175
and working capital of $1,963,177. The working capital at March 31, 2001 was
essentially the same as at December 31, 2000.
The Company expects to maintain a sound financial base for the balance of fiscal
2001. Management continues to believe that the current level of working capital,
coupled with the flexibility of the Company's cost structure, should suffice to
ensure that on-going operations are financed adequately.
FINANCIAL RESULTS -- THREE MONTHS ENDED MARCH 31, 2001 VERSUS THREE MONTHS ENDED
MARCH 31, 2000
Sales in the first quarter of 2001 decreased 10% from the sales posted in the
first quarter of 2000. The decrease in sales was due to a decrease in our OEM
business.
The Company's margins in the first quarter were lower than those seen in 2000
(59% in 2000 and 50% in 2001). The decrease was primarily due to higher fixed
costs combined with a slowdown in production caused by component shortages.
Operating expenses were lower in the three months ended March 31, 2001 versus
the three months ended March 31, 2000, principally due to the pound weakening
against the dollar relative to the first quarter of 2000. Management anticipates
some increase in its operating expenditures during the balance of 2001.
No tax provision was recorded for the three months ended March 31, 2001 owing to
the Company's ability to use net operating loss carryforwards in both the U.S.
and United Kingdom.
Net income for the quarter was $35,276 or $.01 per share in contrast to $84,987
or $0.03 per share in the first quarter of 2000.
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FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company or statements made by its
employees may contain "forward-looking" information which involves risks and
uncertainties. In particular, statements contained in this report which are not
historical facts (including but not limited to the Company's expectations
regarding business strategy, pricing, anticipated operating results, operating
expenses and anticipated working capital) may be "forward-looking" statements.
The Company's actual results may differ from those stated in any forward-looking
statements. Factors that may cause such differences include, but are not limited
to, risks associated with the introduction of new products, development of
markets for new products offered by the Company, the Company's relationships
with distributors and OEM's, the economic health of such OEM's, government
regulation, competition and general economic conditions.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Non-qualified Stock Option Agreement dated January 3, 2001
with Ralph E. Hanson
10.2 Non-qualified Stock Option Agreement dated January 3, 2001
with Derrick Ebden
10.3 Non-qualified Stock Option Agreement dated January 3, 2001
with George F. Harrington
10.4 Non-qualified Stock Option Agreement dated January 3, 2001
with Drusilla F. Hays
(b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACE MEDICAL, INC.
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(Registrant)
Date: MAY 17, 2001 /s/ RALPH E. HANSON
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Ralph E. Hanson,
President and Chief Executive Officer
(principal executive officer)
Date: MAY 17, 2001 /s/ RALPH E. HANSON
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Ralph E. Hanson,
Chief Financial Officer
(principal financial officer)